Fixed Rate Mortgage Could Get You A Good Nights Sleep
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We are going to investigate what a fixed rate mortgage can do for you. Then prepare to be amazed at the savings made with a mortgage overpayment calculator. You get security from the fixed rate mortgage & you may get a nice surprise from the overpayment calculator.
There are a few different types of mortgage, the fixed rate being only one of them. The interest rate is fixed, usually for a number of years. Your interest rate, and therefore your payments are fixed.
Are there any benefits to a fixed rate mortgage? No need to worry about fluctuating interest rates. Your rate and your payments are fixed. You can estimate your outgoings easier knowing your monthly payment is fixed.
Your payment is locked so it really doesn't matter what the general rates are doing. There have been some alarming short term interest rate rises in our recent history. If the rates rose drastically over a short term those on variable mortgages could struggle to meet payments.
A fixed rate mortgage could be a mistake for you under certain circumstances. Moving home in the next year or so. Having a planned or even unplanned child can be reasons to avoid fixed rate mortgages. Any sort of situation like this can cause unexpected charges by way of redemption penalties.
Most fixed rate mortgages come tied to a nasty redemption penalty. These redemption penalties can hit you hard just when you don't need it. Think hard before you take a fixed rate mortgage as these charges can really disrupt your plans.
One thing to consider while having the mortgage is to pay a bit extra every month if you can afford it. You may not realise but you can pay any amount over the minimum monthly payment. You lender will prefer you make the minimum payment and will never tell you it's possible to pay extra.
What are the best reasons to paying a bit extra every month? Topping up your monthly minimum payment means you can knock a few years of the length of your mortgage. By paying a bit extra now, the savings mount up substantially later on.
How do you use a mortgage overpayment calculator? Enter all the figures that relate to your mortgage. You also enter a figure that you want to overpay. You can play around with this figure.
You get a resulting figure out of the calculator in years you can shave off. You get to see how much money you could possibly save. Both the years and cash saved obviously increase if you put in a higher overpayment figure.
There are astonishing amounts of savings to be had. If you borrowed a hundred thousand at five percent over twenty five years. Making an overpayment of 50 every month will save you 12,000 and knock over 3 years off.
If you can afford to pay 100 extra instead of 50 what would happen? Using the same example mortgage from earlier we now pay 100 extra. In this new example the time saved is over six years and the financial saving is more than twenty thousand.
Another benefit is that for the last few years of the original (25 year) term, you don't pay anything. Being free of your mortgage chains a few years early is a definite reality if you can pay extra now. Lenders will not tell you this, they like to keep this a secret.
In our example where we saved six years off the length with a hundred a month overpayment. No payments for 6 years means another 40 thousand saved in monthly payments. This is money you can spend or save as it's not going to your lender every month.
In conclusion we listed a few benefits of a fixed rate mortgage. Every month you pay the same so you get to sleep easy at night knowing this. We also had a look at the savings to be made by paying a bit extra every month. It all adds up.
Article Source: Articlelogy.com
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